NEW YORK -- Will the 12 months of 2007 add up to the convenience-store business' best year yet? According to the industry's version of the Magic 8-Ball, all signs seem to point tomaybe. Just maybe.
Last week's CSPNetwork CyberConference, titled How's Business 2007: Going from Great to Good Enough, suggested that many metrics point toward positive growth that could make 2007 one of the industry's best years on the books. [Click here for an OnDemand rebroadcast of the CSPNetwork [image-nocss] CyberConference (free for retailers and wholesalers, $49 for suppliers).]
Is this going to be the best year ever? asked Ben Meyer, national sales manager for CSX, a division of Alexandria, Va.-based NACS, during his CyberConference presentation. It's too soon to tellbut it could very well be better than last year.
Indeed. For starters, cents-per-gallon retail fuel margins for the three months ended March 2007averaged 12.9 cents per store per month, a 1.3% increase over the 11.6 cents expressed during the same three-month period of 2006.
In fact, just about every metric showed a substantial increase over the prior-year period on a per store per month basis, from fuel gallons (105,800 gallons vs. 103,800, a 2% increase) to in-store gross profit dollars ($26,200 vs. $25,300, a 3.7% increase). The data's same-firms' sample size included 79 firms, representing more than 4,500 stores.
Of course, obstacles persist. Credit-card fees for the first three months of 2007 increased to $3,400 per store per month, an 8.4% hike compared to the same period of 2006. Furthermore, controllable costs continued their upward climb. Total salaries and benefits, for example, increased 3.1% to $15,900 per store per month, while utilities increased 3.7% to $2,600 per store per month.
Despite the challenges, it's tough for even the most pessimistic of operators to ignore the encouraging signs and early indicators that suggest growth.
The first part of the year isn't exactly the real driver of our business, but boy, what a great positioner, said Roger Grogman, vice president of marketing for McLane Co., Temple, Texas, the industry's largest wholesaler, who presented wholesale-purchase data for the early part of 2007. We're seeing a really good thing[in that] the core habit' categories are beginning to advance, and there's a lot of exciting activity [elsewhere].
McLane's shipment trends to convenience retailers from the year's beginning through May 18, 2007, show most of the major categories up significantly compared to the same period from 2006. Average per store per week cigarette shipments rose approximately 10.3% and other tobacco product shipments increased 14.6%, while foodservice prepared onsite shipments climbed more than 25%, for example.
An $819 increase in average per store per week shipments represents a nearly 9.8% improvement over year-to-date 2006, reflecting an overall favorable trend. Cigarettes shipments' growth of 10.3%, specifically, represented an increase of nine cartons per store week. Factoring out extraordinary increases in cigarette excise taxes, according to Grogman, the actual increase for shipments was approximately 6.3%.
Other classes of trade that are part of our business portfolio are having a good year as well, said Grogman. [But] the convenience segment is enjoying a greater increase than other classes of trade. That speaks highly of what type of year this is going to be, and I think this is going to be a great one.
Cigarettes and other tobacco products such as cigars and moist smokeless tobacco may be a bigger driver of in-store sales than any other category in the store, with the possible exception of foodservice, said Grogman, so increases in shipments of those categories bode well for inside sales overall.
Chris Rebello, manager of category development strategy for U.S. Smokeless Tobacco Co., Greenwich, Conn., introduced the presentations from Meyer and Grogman with some figures showing growth and increased usage incidence of moist smokeless tobacco, due perhaps to increased limitations in where cigarettes smokers can light up.
For 2006, category incidence reached 6.1 million people, compared to 4.7 million people in 2001a 30% increase. Furthermore, he showed research indicating that 65% of adult consumers enter the category through premium brands.
The convenience channel is where the smokeless consumer shops, said Rebello, whose company sponsored the CyberConference. The convenience channel captures more than 70% of the one billion cans of category unit volume, according to data from first-quarter 2005 through first-quarter 2007.
Convenience has consistently outperformed other channels, Rebello said while revealing data that showed the convenience channel's unit performance trending consistently higher than other channels dating back to first-quarter 2006. For the first three months of 2007, the convenience channel's unit performance saw a 9.6% increase, compared to all channels' boost of 7.9%.
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